NAB executive expects a hit to lending books
(28 September 2012- Australia) National Australia Bank (NAB)’s chief financial officer, Mark Joiner, said tougher global rules and credit rating agencies’ dim view on global money markets will constrain banks’ ability to grow their lending books.
Joiner told a business lunch in Melbourne on Wednesday that NAB’s wholesale funding costs would only peak in the middle of 2014, despite the Reserve Bank of Australia (RBA) indicating funding costs were showing signs of stabilising.
Joiner said Australian banks had ''maxed out'' in terms of obtaining wholesale funding and those seeking to lend more would only do so to the extent they could also grow deposits.
''In my view, the Australian banks, for a long time, will only be able to buy the asset side of their balance sheet dollar for dollar with what they bring in on the customer side, this valuable retail side,'' he said.
If banks were to borrow more to extend lending ''the regulators will start to get more assertive'' and ratings agencies would consider downgrading them.
''It's very clear that Basel III is going to drive us to a more retail [deposits] mix. At the moment I see a pendulum swing towards regulation and I don't see a lot of informed debate as to whether this is the right response and how far is far enough,'' Joiner said.
Joiner said Australian banks had ''maxed out'' in terms of obtaining wholesale funding and those seeking to lend more would only do so to the extent they could also grow deposits.
''In my view, the Australian banks, for a long time, will only be able to buy the asset side of their balance sheet dollar for dollar with what they bring in on the customer side, this valuable retail side,'' he said.
If banks were to borrow more to extend lending ''the regulators will start to get more assertive'' and ratings agencies would consider downgrading them.
''It's very clear that Basel III is going to drive us to a more retail [deposits] mix. At the moment I see a pendulum swing towards regulation and I don't see a lot of informed debate as to whether this is the right response and how far is far enough,'' Joiner said.
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